Roman Forest Public Utility District No. 3 v. Roman Forest Consolidated Public Utility District (In re Roman Forest Public Utility District No. 3)

339 B.R. 891, 2005 Bankr. LEXIS 523, 44 Bankr. Ct. Dec. (CRR) 130
CourtUnited States Bankruptcy Court, S.D. Texas
DecidedFebruary 8, 2005
DocketBankruptcy No. 03-36168-H4-9; Adversary No. 04-3269
StatusPublished

This text of 339 B.R. 891 (Roman Forest Public Utility District No. 3 v. Roman Forest Consolidated Public Utility District (In re Roman Forest Public Utility District No. 3)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Roman Forest Public Utility District No. 3 v. Roman Forest Consolidated Public Utility District (In re Roman Forest Public Utility District No. 3), 339 B.R. 891, 2005 Bankr. LEXIS 523, 44 Bankr. Ct. Dec. (CRR) 130 (Tex. 2005).

Opinion

MEMORANDUM OPINION ON INDIVIDUAL DEFENDANTS’ MOTION TO QUASH OR LIMIT DEPOSITIONS (DOC. # 34)

JEFF BOHM, Bankruptcy Judge.

William B. Frederick, Billy W. Goss, Keith Humbert (incorrectly named in the adversary proceeding as “Mumbers”), Joseph Alexander, and Charles Meek (the Individual Defendants) filed a Motion to Quash or Limit Depositions (the Motion) in the above-styled adversary proceeding. The Individual Defendants’ position is that, as directors of Roman Forest Consolidated Public Utility District (PUD), they are immune from a deposition. This Court disagrees for the reasons stated herein.1 This Court holds that Roman Forest Public Utility District No. 3, the Debtor/Plaintiff (the Debtor), a municipal water district, is entitled to depose the Individual Defendants on all subjects and issues raised in the Debtor’s pending complaint.

I. Factual Background and Relevant Procedural History

At the hearing on the Motion, neither party called any witnesses to establish any facts. Rather, the relevant facts were established by reference to the record in this adversary proceeding and in the Debtor’s Chapter 9 case, and by statements and assertions made by counsel of record in pleadings and at the hearing, which constitute judicial admissions. All of the written documents referenced in this opinion are attached as exhibits to pleadings filed by one or all parties, and none of the parties dispute the authenticity of these documents.

The relevant facts, in chronological order, are as follows:

1. On May 11, 1972, PUD and the Debtor entered into a written contract for forty years whereby PUD would provide the Debtor with water and waste disposal services (the Contract).
2. On May 1, 2003, the Debtor filed a petition for relief under chapter 9 of the Bankruptcy Code.2
3. On May 30, 2003, while the automatic stay was in effect, PUD’s counsel sent a letter to the Debtor expressly stating that: (a) the'Contract is no longer valid or enforceable; and (b) PUD would not provide water or sewer service to any water or sewer connections within the Debtor’s district not being served as of the date of the letter.
4. On December 30, 2003, while the automatic stay was still in effect, PUD filed suit against the Debtor in the District Court of Montgomery County, Texas (the State Court Suit). PUD’s petition candidly concedes that since the date that the Debtor and PUD entered into the Contract, the cost of providing water and waste disposal services has risen and, as a result of these increased costs, the rates in the Contract are simply too low. In the State Court Suit, PUD requests the court to de[894]*894clare that the Contract is unenforceable and that PUD is not bound by the terms which cap the rates that PUD may charge. PUD also requests the state court to enjoin the Debtor from authorizing any residents of the Debtor’s district to connect to the water system.
5. On December 30, 2003, once again while the automatic stay was in effect, PUD filed an application for temporary injunction in the Montgomery County District Court. This Court issued an order on this same day scheduling a hearing on PUD’s application for January 16, 2004.
6. On January 12, 2004, the Debtor filed a Suggestion of Bankruptcy in the State Court Suit setting forth that the Debtor had filed a bankruptcy petition in May of 2003.
7. On March 31, 2004, PUD filed a Motion for Relief from the Stay with this Court. In the Motion for Relief, PUD requested this Court to declare that the automatic stay is inapplicable to the State Court Suit or, alternatively, to terminate the stay and permit PUD to prosecute the State Court Suit.
8. On April 2, 2004, the Debtor filed a complaint in this Court (the Complaint) against PUD and the Individual Defendants alleging that PUD and its board of directors (i.e., all of the Individual Defendants), by taking the actions described in paragraphs 3, 4, and 5 above, have (a) violated the automatic stay; (b) sold the water and sewer capacity to third parties at a profit and thereby committed wrongful conversion for which they are liable; and (c) tor-tiously interfered with the Debtor’s contractual rights by wrongfully terminating the Contract and interfering with negotiations with developers that would form the basis of a plan of adjustment in the Debtor’s chapter 9 case. The Complaint also alleges that PUD has breached the Contract by refusing to provide water and sewer supply to all landowners within the Debtor’s district; and that the Individual Defendants have negligently sold water and sewer capacity earmarked for the Debtor to third parties in order to profit from the Debtor’s property rights. Finally, the Complaint requests this Court to issue an injunction requiring PUD to perform its obligations under the Contract.3
9. On April 5, 2004, the Debtor filed on Objection to the Motion to Lift Stay. The Debtor requested this Court to deny the Motion for Relief from the Stay.4
10. On April 27, 2004, this Court (the Honorable William Greendyke) held a hearing on PUD’s Motion for Relief from the Stay and denied the motion.
11. On April 30, 2004, the order denying PUD’s Motion for Relief from the Stay was entered on the docket.
12. On May 3, 2004, the Individual Defendants filed in this Court a [895]*895Motion to Dismiss (Doc. # 12) seeking to have themselves dismissed as parties to the Adversary Proceeding. On this same day, the Individual Defendants, together with PUD, filed an answer to the Complaint. This pleading is entitled “Answer of Defendants” (the Joint Answer). In addition to responding to the allegations in the Complaint, the Joint Answer also contains a counterclaim which is entitled “Counterclaim of Defendants” (the Counterclaim).5 The Counterclaim asserts that: (a) performance of the Contract should not be required due to laches on the part of the Debtor; (b) the Contract is void for lack of consideration; (c) the Contract should be terminated because it presents a severe economic hardship for PUD; and (d) the Contract should be declared void because the specific terms under the Contract which cap the rates are no longer valid under applicable law.
13. On May 7, 2004, the Debtor filed an Objection to the Motion to Dismiss (Doc. # 13).
14. On July 9, 2004, the clerk of this Court entered a Comprehensive Scheduling, Pre-Trial and Trial Order (Scheduling Order), signed by the Honorable Robert C. McGuire. (Doc. # 15). Under the Scheduling Order, the deadline for completing discovery was January 31, 2005, and all dispositive motions are to be filed by February 14, 2005. A pre-trial conference is to be held on February 24, 2005 and trial is to be held during the week of March 14, 2005.
15. On August 9, 2004, PUD filed a Motion to Abstain (Doc. #20) in the Adversary Proceeding.
16. On August 20, 2004, the Debtor filed an Objection to the Motion to Abstain (Doc. # 24).
17. On August 30, 2004, this Court (the Honorable Robert C. McGuire) held a hearing on the Motion to

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339 B.R. 891, 2005 Bankr. LEXIS 523, 44 Bankr. Ct. Dec. (CRR) 130, Counsel Stack Legal Research, https://law.counselstack.com/opinion/roman-forest-public-utility-district-no-3-v-roman-forest-consolidated-txsb-2005.